Our retail pick for 2026 - Amazon

On Feb 5, 2026, Amazon (AMZN) reported Q4 and full-year 2025 earnings that exceeded expectations, with quarterly revenue at $213.39 billion and diluted EPS of $1.92. Full-year revenue reached $716.92 billion and EPS was $7.17, beating estimates by slim margins. Yet AMZN stock dropped about 8% post-announcement and remains down year-to-date, reflecting sector-wide unease over heavy capital expenditures—especially Amazon's planned $200 billion CapEx for 2026 focused on AI infrastructure.

Despite robust growth in all segments—AWS revenue rose 24% to $35.6 billion, and advertising revenue increased 23% to $21.3 billion—investors remain cautious due to slower AWS expansion and the low-margin reputation of e-commerce. Margins are improving: gross profit rose 16%, operating income 18%, and net income 6% in Q4, with higher-margin businesses like advertising, AWS, and subscriptions contributing more. For FY 2025, gross margin surpassed 50%, signaling a shift toward profitable streams.

Amazon’s Alexa+ launched in early 2026, free for Prime subscribers or $19.99 monthly, boosting user engagement and presenting significant potential revenue if adoption grows. The ad business is increasingly valuable, bolstered by deals with Netflix and Spotify and new AI-powered tools.

Regulatory risks arose in Germany, with Amazon fined €59 million for algorithmic price controls—potentially a precedent for broader EU action but financially manageable. Despite these challenges, Amazon’s diversified high-margin offerings, strong financials, and current stock weakness make it attractive for long-term investors. My Strong Buy rating stands, given the company’s evolving revenue mix and compounding growth opportunities.

Technicals (AMZN) 

a. 8-21 EMA is beginning to curve up

b. Major bottoms to tops Fibonacci measure indicative of a bounce off the golden 61.8 level

Trade idea

Bull put-spread. Sell the 200 buy the 180 and give this 40+DTEs. You can try this wider by buying the lower strike a bit lower. Use the credit generated from the trade to fund your 230 strike calls with approximately the same Theta.

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